Monday, June 11, 2012

11/6/2012: ESM / EFSF : building a bypass to nowhere

A quick one. Why ESM+EFSF lending capacity can't take Spain 3-years of funding (if Exchequer funds are drawn)? Here's a chart from Bridgewater:

Estimates for banking sector needs of Spain alone are running on average around €250 billion, with some sovereign supports, this rises to €370-470 billion. This will more than top the €700 billion hypothetical capacity of EFSF/ESM funding. With full 3 years Exchequer supports, the above mid range estimate can rise to ca €550 billion. That scenario (rather benign, given the markets conditions) will leave EFSF/ESM with ca €150 billion of funds (assuming Cyprus and Ireland do not dip into the funds this year or next) and that is nopt enough to fund Italian deficits and debt redemptions for even 1 years.

As the song goes: So long and thanks for all the fish...
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